Wrap Around Mortgage, Texas

[Eric Thomson]

Hello BP. I am selling a flip turned primary residence and have a buyer requesting owner financing. I am carrying a conventional mortgage on the property so I would need to setup my first wrap around mortgage/contract for deed/land contract. I understand the pros and cons of this strategy and have read over the years about many of you doing these for decades and never having the lender invoke the due on sale clause. Is that still true over the last decade since the mortgage crisis, or as long as payments are being made (and deed not being recorded) will I be ok? What is your "plan b" if the loan is called? I'm thinking worst case scenario I could refinance with a less-than-desirable investment loan of some sort to get me through to the balloon.

[Andrew Postell]

@Eric Thomson first, we do have a pretty active Texas forum if you ever are needing Texas recommendations that's a good place to ask.  Lots of good local people monitor that.

Now, to speak about the "due on sale" clause:

This clause is talked about A LOT...almost too much.  Most people who speak about it have never even read it....so I included it here with this post.  The verbiage I like to see is "MAY"...and you'll even see that if the lender evokes this clause that you have 30 days to rectify the situation.

That's the verbiage itself.  I cannot speak about every lender here and since my employer might have a vested interest in what I am about to say I just want to speak in generalities here:  Lenders make a TON of money on mortgages.  And if they were to take a performing assets...and have to transfer it to a non-performing asset on their balance sheets....then that makes them look less desirable to regulators and other lenders that they may borrow from.  Not to mention that it costs A LOT to attempt to foreclose on a property.  Lenders don't want to do this.  ANY of this.  So just pay that mortgage on time and every lender will LIKE your mortgage.  Even if something else is going on with it.

I hope that makes sense how I am describing this.  Let me know if you have any other questions.  Thanks!